ITAT Bangalore Bench recently in an appeal held that any fees paid by the assessee to foreign agencies  for availing the service of access to record of online consumers maintained by them, to carry out market research for its clients, will be regarded as royalty and liable to deduct tax at source while making payment in question. Facts of the case: The assessee is engaged in market research activity in India and abroad. It involves processes like preparing questionnaire, collecting data from a sample representative of the population which uses or has some experience with the desired product/service, analyzing the results and then preparing reports based on the results of the analysis. The assessee sends questionnaire and conducts survey through e-mail from consumers and decision makers worldwide. To enable to carry out its market research for its clients, the assessee approaches specialist agencies that maintain records of online consumers and pay fee to them for allowing access to the record of online consumers maintained by them. The grounds of appeal raised by the assessee was with regard to the action of the Revenue authorities in disallowing as a deduction, payments made by the assessee to non-residents on the ground that tax was not deducted at source as required u/s.195(1) of the Act. The Revenue authorities disallowed the claim of the assessee for deduction by invoking the provisions of Section 40(a)(i) of the Act. The learned counsel for the assessee held the payments were made for providing access to information and the panel companies merely help the assessee in reaching out faster to the samples and do not take part in survey form or analysis of the data. It was his submission that in the present case, all the payments to panel companies were made outside India. Therefore, the said receipts are not chargeable in India on ‘receipt basis’. The payments to non-resident cannot be said to be income which is deemed to be received in India is set out in section 7 and section 198 of the Act. The question that arises for consideration in the appeal by the assessee is as to whether the fee paid to such specialists (who are all admittedly non-residents) for allowing access to the data is chargeable to tax in India and therefore, the assessee ought to have deducted tax at source when making payments to them u/s.195 of the Act.Hence, the appeal was made by the assessee before the Tribunal. The decision of the Appellate Tribunal: The CIT(A) concluded that the payments by the assessee to the non-resident was in the nature of fees paid for rendering “Fees for Technical Services”. AO held that the payments were not for rendering any technical or management services but were for rendering Consultancy Services and therefore would fall within the ambit of “Fees for technical Services”. The CIT(A) upheld the order of the AO. The Appellate Tribunal stated that even if for argument sake, the plea of the learned counsel for the assessee ,that the payments made by the assessee to the nonresident is not “Fees for Technical Services” is considered, the assessee cannot avoid its obligation to deduct tax at source u/s.195 of the Act. In view of the decision of the Hon’ble Karnataka High Court, which is the jurisdictional High Court, the Tribunal was of the view that the payment in question is in the nature of “Royalty”.   Income tax return filing for F/Y 2013-14 has started. Please click here to visit our ITR filing page.